Permission for mining operations on the shelf of Baltic Sea shall be a trial step, after which the admission of the private companies to the Arctic can follow

6 may 2015
| Rossiyskaya Gazeta

Private companies were given the right to conduct mining operations on the shelf. In respect of mineral resources of the Baltic Sea, the rule terminates, according to which only Russian companies with at least five years experience in offshore production, being under state control, may develop the new fields there. Russian newspaper has published relevant amendments to the law "On Subsoil".

Alexander KurdinDepartment for Fuel and Energy Sector

"This is just part of the extensive long-term dispute, related to the
admission of private corporations to offshore fields of oil and gas," says
Alexander Kurdin, the Head of the Department for Strategic Studies in Energy of
the Analytical Center, commenting the situation to "Russian newspaper".
According to him, "private entrepreneurs" are seeking the right to mine on the
shelf since 2008, when it actually became a monopoly of "Gazprom" and
"Rosneft". Private companies have been denied the right to develop the open
field on the shelf, even if they had by this time the right to exploration and
now the law guarantees them a license to mining, but only in respect of the
waters of the Baltic Sea, said Mr. Kurdin.

The Arctic is in a special position. There are more difficult mining
conditions: no infrastructure and very high environmental risks, the expert
explains. In addition, the Arctic has a totally unique strategic value, and oil
and gas reserves are much greater there.

"It seems to me that the permission for mining operations on the shelf of
Baltic can be a trial step, after which the admission of the private companies
to the Arctic can follow, where the stakes are even higher, says Mr. Kurdin. It
will take three to five years to assess the effect of the admission of private
companies to the subsoil resources of the Baltic Sea."

The expert believes that the liberalization of production will spur the
development of the industry. The development of new fields is increasingly
expensive, and from this point of view it is very important to expand the
opportunities for private investment in mining. Shelf, open to private
companies, will be a factor of increasing the efficiency both in the
state-owned companies, which will have to operate in an increasingly
competitive environment, says an expert. But pitfalls are everywhere. The
government intends to partially privatize the "Rosneft", and the increased
competition on the shelf may reduce the market capitalization of the
company.